So far in China there have not been any published decisions regarding price-fixing or other anti-competitive agreements based on concerted action by competitors. There is also no Chinese legal precedent for including potential competitors in the analysis of antitrust law compliance. But China’s antitrust enforcers are very much aware of how the U.S. and EC enforce antitrust laws. We may thus begin to see more cases where the Chinese enforcers enforce the Anti-Monopoly Law’s (“AML”) prohibition of anti-competitive agreements among competitors based on concerted action using the same approach as the EC, whose decision to fine banana suppliers for fixing the price of green and ripe bananas was recently upheld by the European Court of Justice (“Court”) in Dole Food and Dole Germany v. Commission, case number C-286/13 P. While this is not the first time the EC has fined companies based on concerted action, it reinforces some of the broad sweeping concepts that make it easy to punish a company in an administrative process, such as in China, where the enforcer, investigator and judge are essentially the same body. This is particularly of concern in China given the discretionary power of the Chinese enforcement authorities.
Similar to the U.S. and EU, under the Chinese AML, agreements can be either explicit or inferred from conduct. An example of an explicit price fixing agreement is where competitors meet and agree on price margins or price increases, documenting the agreement in minutes or email correspondence between the competitors. In contrast, concerted action lacks an explicit agreement and the tacit agreement to fix prices must thus be inferred from conduct. Under the AML, concerted action arguably can be implied by looking at such factors a whether the companies raise or lower prices in tandem, to what extent the companies communicated business goals and other similar information to each other, the dynamics of the relevant market structure (who are the players in the market/how competitive is the market/changes in the market) and whether the companies are able to justify their concerted action.
The concerted action in the banana cartel case that was considered to be improper was the exchange of pre-pricing information, such as factors relevant to the setting of quotation prices for the forthcoming week or factors that discussed or disclosed price trends or “gave indications of quotation prices” for the forthcoming week. The Court confirmed the General Court’s view that such information related to factors that influence supply versus demand, market conditions and price developments. The Court repeated its view that direct or indirect contact between companies that may influence the conduct of actual and potential competitors is prohibited where the purpose or effect is to create conditions which do not correspond to the normal conditions of the market (paragraph 120 of the Judgment of the Court, March 19, 2015).
Other broad language from the decision includes: (a)“the exchange of information between competitors is liable to be incompatible with the competition rules if it reduces or removes the degree of uncertainty as to the operation of the market in question, with the result that competition between undertakings is restricted” (paragraph 121); (b)“Concerted practice…implies, in addition to the participating undertakings concerting with each other, subsequent conduct on the market and a relationship of cause and effect between the two.” (paragraph 126); and (c) “as they make it possible to reduce uncertainty for each of the participants as to the foreseeable conduct of competitors, the pre-pricing communications had the object [purpose] of creating conditions of competition that do not correspond to the normal conditions on the market and therefore gave rise to a concerted practice having as its object [purpose] the restriction of competition within the meaning of Article 81 EC.” (paragraph 134). This type of language is sweeping in the sense that terminology such as “liable,” “implies,” “make it possible to reduce uncertainty,” “foreseeable conduct of competitors” are difficult to quantify or (dis)prove.
The relevance of this decision to China is that an allegation based on concerted action is not only vulnerable to potentially distorted facts and easy conversion into a violation because of the reliance on implications rather than an overt agreement, but also to the discretion of the Chinese authorities. One must not forget that China’s industrial policy is an underlying factor. Complaints may arise from domestic companies competing with foreign companies. China’s antitrust enforcers interact with antitrust authorities of other jurisdictions through training programs and other meetings, and companies doing business in China should not underestimate the capacity of the Chinese authorities to enforce the AML.